When a Developer fails to meet the deadline for the delivery of vacant possession of property to the Purchasers under a Sale and Purchase Agreement (“SPA”), they may apply for what is known as an Extension of Time (“EOT”). Unforeseen delays can occur at any point throughout the construction process and Developers would typically seek to rely on a EOT clause provided for in a development or construction agreement to avoid incurring additional loss or expense. The question then is, who exactly has the authority to grant an EOT for such delayed projects?
The recent Court of Appeal case of Bluedream City Development Sdn Bhd v Kong Thye & 184 others [2022] 1 LNS 74 clarified the decision made in the previous Federal Court ruling in Ang Ming Lee & ORS v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 CLJ 162 that the Minister of Housing (“Minister”) cannot delegate his powers under the Housing Development (Control and Licensing) Act 1966 (“HDA”) to grant an EOT for the completion of a housing development to the Controller of Housing (“Controller”).
What happened in Bluedream City Development?
A development of service apartments was subjected to a Stop Work Order (“SWO”) due to subsidence and cracks discovered at a nearby school. The Developer applied for a total of two EOTs with the first EOT of 6 months being granted by the Controller, and the second EOT of 17 months being granted by the Minister (by virtue of the SWO).
The Purchasers were aggrieved by the said EOTs as this caused for delays in completion of the project and prevented them from rightfully claiming for Liquidated Ascertained Damages (“LAD”) to compensate them for late delivery. The Purchasers then challenged the Minister’s decision of granting an EOT by way of a Judicial Review application which was allowed by the High Court. The Developer, dissatisfied with the High Court’s decision, appealed to the Court of Appeal who reversed the High Court’s ruling and upheld the Minister’s decision to grant the EOT in the present case.
The Court of Appeal’s reasoning for its decision
The Court of Appeal referred to and clarified the decision made by the Federal Court in the Ang Ming Lee case when making its decision.
In Ang Ming Lee, the Federal Court had firmly stated that the Minister cannot delegate to the Controller his powers to regulate the terms and conditions of a contract of sale (which includes the power to modify the date for delivering vacant possession). The Federal Court highlighted that the wording of Section 24(2)(e), HDA only expressly allows the Minister to regulate and prohibit the terms of a contract of sale and it is Parliament’s intention that the Minister is expected to apply his own mind to the matter when doing so. Consequentially, the Federal Court also ruled that Regulation 11(3) which allows the Controller to “waive or modify” the provisions of a statutory SPA was ultra vires the HDA.
The Court of Appeal in Bluedream City Development clarified that the Federal Court’s ruling in Ang Ming Lee does not negate the Minister’s own power to waive or modify the terms of a statutory SPA himself. The Court of Appeal further distinguished the Federal Court case (whereby it was the Controller that granted the EOT) from the present case (where it was the Minister himself that granted the second EOT – which the Court of Appeal held was reasonable in the circumstances as the EOT was granted pursuant to a valid SWO).
As summarised by the Court of Appeal, the Minister in arriving at his decision must not take into account irrelevant considerations or to act in bad faith. Any such decision must be acted on after factoring in the genuine hardships suffered by the Developer as well as any potential unfairness or difficulties suffered by the Purchasers.
Nevertheless, the decisions of the above two cases clearly state that the Minister is indeed empowered by the HDA to regulate or prohibit the terms and conditions of a contract of sale, and such power to regulate does not constitute to power to delegate the same to the Controller.
Conclusion
In short, the Court of Appeal decision has clarified that the Minister may not delegate his powers under the HDA to grant an EOT for the completion of a housing development to the Controller, but may personally exercise such powers to waive/modify a contract of sale himself.
Every case is distinct and unique in its facts; therefore, while the court is empowered to review and strike down a governmental authority’s decision on account of unreasonableness, proportionality and irrationality, a balance must always be struck whereby the interests of the Purchasers and the burdens and hardships faced by Developers are genuinely taken into account to avoid any injustice being done to such parties.
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Author: Mariko Michelle Liu, Diploma in Law (SEGi College Sarawak).
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